Punters - you’ve never had it so good in today’s worldITS ALL ABOUT RETURN ON OUTLAY (Part 1)

By Ken Blake

The idea of deriving your income solely from wagering on horses has been predominantly viewed by society as an ethically objectionable career choice.

The inexorable link between racing and gambling has seen such pursuits stigmatised, with active participants labeled with less than flattering connotations. Paradoxically, a similar pursuit into the volatile environment of speculative share trading is regarded as acceptable in daily business practice.

It would seem that those operative in the share arena, irrespective of any risk volume, are seen largely as investors, while those in the racing domain, no matter how meticulous or skilled, are seen largely as gamblers.

On the basis of this rationale, horse punters have been most unfairly treated. Horse wagering and share trading to many may seem poles apart but factually they share considerable common ground.

Both markets are driven by knowledge and information, have a large public participation, offer indistinct future profit margins and confront participants with a risk decision making process.

The share market is the more complex of the two arenas. Horse racing in essence is a zero sum game with no real wealth created. Each winner is paid from a fixed pool of money wagered on each race.

There is wealth creation in the share market by the supply and demand of the market and the underlying value creation of individual companies that comprise the market. Both, however, exhibit enough market inefficiencies for prudent operators to glean a profit.

Blue chip share trading and the acquisition of other such proven performers has always been a traditional investment vehicle for those seeking long-term low risk gain.

Racing’s greater masses appear to have paid little credence to duplicating such intentions within racing’s wagering arena. The seductiveness of instant larger returns has always outweighed any perceived less rewarding proposition over time.

Historically, racing has always been a “for the moment” venture. Nonetheless, attitudes on how we should approach punting seem to be changing with technology advancements. The advent of the Internet has revolutionised the gambling industry; the astonishing growth rate over recent years has seen Internet gambling balloon to gargantuan global proportions.

The net has also hastened the genesis of a new breed of gambler.

A new wave of computer savvy punters armed with databases, spreadsheets and financial models has emerged on the scene and are making successful inroads into gambling’s largely untapped riches.

The days of form analysts hunched over paper guides for hours on end trying to glean an edge out of limited information, must seem incomprehensible to today’s punter, given the ease and volume of information available through the net.

The new breed now sees horse punting as both a legitimate career choice and long-term viable investment entity. To them it is just a job, no emotion, no stigma, just numbers, percentages and the working of markets within preset acceptable risk parameters. Technology, and a vast increase in betting options, has never seen the punter better placed for ongoing success.

The market competitiveness from those offering wagering platforms has further opened the door for shrewd punters to win on a consistent basis.

The arrival of Betfair, Austote and other such institutions who extend minimum pool takeout figures, give every opportunity to punters to now maintain more of a consistent edge that was not possible years ago.

If approached in the right manner, racing returns can easily outperform the more traditional vehicles such as shares and superannuation. For those engaged in superannuation salary sacrifice, consideration may be given to the assignment of any monies in this area going into a controlled low risk punting fund.

Another very appealing aspect of punting as an investment is that winnings are non-taxable. This feature alone is worth thousands of dollars start over conventional avenues.

To make a successful foray into a long-term punting venture, we need to acquaint ourselves and focus on areas that will be fundamental for sustainable success.

Firstly there is no gambling Holy Grail or market secret. The key is a plan, a structured approach and education. If longevity is the target, then it is imperative that we have the ability to both identify and manage risk.

Proper money management is a function of finding a point that maximises returns within acceptable risk parameters. If we operate in a high risk environment, we dramatically increase the odds of ruin, conversely if we play “too safe” then there is insufficient reward.

Even though we have a long-term aim, returns still must move our plan along at a satisfactory rate. It is pivotal to our projected goal to find a sweet spot in this sector.

It is most important also given our target that we adopt a compatible mindset of win small, win often. There always exists a trade off between the inclination to achieve a higher profit line and the necessity to control risk. Such is the essence of gambling. Higher risk takers may enjoy more success in the short term, but those who embrace the reduced risk lower growth rate are much more likely to attain longevity in their desired field.

Risk management in punting is something that is still misunderstood by many and definitely under serviced. It is a defensive concept that fundamentally keeps us in the game and is the one thing that will eventually determine success or failure. There are numerous ways that risk can be suppressed to an acceptable level in racing. The most efficient way is to operate in a statistically friendly environment.

Most winners in racing have either won or were placed last start, most winners are in the first four market favourites, and horses that race on the speed have a distinct advantage over backmarkers.

Look for horses that display high strike rates at the race distance and also the track, and are not going to be disadvantaged by a poor barrier draw or track conditions.

If we also factor in class and fitness, and operate on fields of around 10 runners or less, then from a statistical perspective we are never going to be far off the mark.

In races where there appears to be only two to three genuine winning chances, then risk can be further suppressed by backing all three runners Dutch book style to achieve a specific wealth target. Dutch betting in many cases can provide a valuable safety net and can cover 70 – 80 per cent of any given market percentage by multi betting three to four horses.

Whatever direction we adopt in our selection process is only really partial to the end cause. We MUST regularly obtain value. Value is the most important thing in betting.

Punters cannot remind themselves of this simple truth too often. Any horse may have a compelling form line that suggests an undeniable winning chance, however, whether it is a good bet or not is entirely determined by one thing: the odds.

This is the very heart of professional punting operations, isolating horses whose price is greater than their calculated winning probabilities. Exploiting the discrepancy between accurate probability assessment and odds being offered is the only course to long-term profitability.

Accomplished form analysts achieve this by framing their own race markets. A regular stream of winners per se is not enough to guarantee success; it is all about return on investment. Market framing is a skill that eventually all serious punters must acquire; it is the cornerstone that enables us to identify value in horse racing. Another aspect most central to our cause is the setting up of multiple betting accounts. Hard core pro’s will tell you percentages are everything; we can ill afford to be taking $2.70 on S-tab when $4.00 plus is offered from Betfair or Austote. One account is simply too restrictive and to our long-term detriment.

We’ve fleetingly touched upon the requisite areas of proficiency and the type of mindset that is essential for any long-term viable punting venture.

For those with developed racing skills and a desire to change direction a little, the long-term task shouldn’t prove too troublesome. For those who are not so advanced, the path may be a little longer, but with some research and guidance, can also arrive at the same destination point.

There is no question that an investment of this type can out-perform society’s standard models, and also offer benefits that the others cannot. Besides, has anyone ever heard of a racing market crash?

In part two of this article we will look at some of the practical applications of the above points, with focus in particular on market framing and market efficiency with the view of setting up our own long-term portfolio.

We will also examine the modus operandi of one of the world’s most powerful betting organisations and how components can assist with our own targets.

Racing markets will always provide an income to those practised in racing skills. For every accomplished analyst there are 500 mugs who will always underwrite the former’s winnings.

For many this concept may appear too pedestrian, for those aspiring to be headline punters are not unlike the comet and the moon. The comet spectacular in the brief but gone in an instant, the moon always emanating a lesser light but there for eternity.

For the comets of the game, continue to bet on impulse irrespective of price, for the moment and without structure, for those of us on the other path, really we don’t mind, plus we could use your money.